High Interest Rates Will Continue to Challenge Builders This Year

Article originally posted on Globe St. on January 30, 2024

High interest rates continue to be a problem for home developers, a trend that a National Association of Homebuilders survey sees continuing this year.

Nine out of 10 builders said that was the case in 2023, according to the January 2024 survey for the NAHB/Wells Fargo Housing Market Index, and 77% expect them to be a problem in 2024.

More than half (52%) cited rising inflation in the US economy as the No. 2 hindrance this year, although that percentage is down from 83% a year ago.

The cost and availability of labor eased slightly last year and 75% still expect it “to remain a significant issue” in 2024. It’s an issue that peaked at 87% in 2019, according to the survey, then fewer builders reported this problem in 2020 (65%), but the share rose again in 2021 (82%) and 2022 (85%), the Index revealed.

The slowdown in single-family construction in 2023 made building materials prices less of a problem for builders last year, as only 63% reported it as a significant issue. Fewer (58%) expect it to face it in 2024.

Problems with attracting buyers is forecast to be a bigger problem this year than last, according to the Index because “buyers expecting prices or interest rates to decline if they wait” persists as a challenge.

Another elevated concern for builders this year is gridlock/uncertainty in Washington.